Japan is now New Zealand’s number one market for chilled beef driven by tariff cuts under the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) trade agreement. However the gains may be eroded following a US-Japan agreement, according to the Meat Industry Association.
In the eight months up until the end of August 2019, New Zealand beef exports to Japan have increased 22 percent and 15 percent by value. In August alone, New Zealand dispatched 679 tonnes of chilled beef to Japan, 26 percent of the total and a 19 percent increase compared to August 2018.
MIA trade and economic manager Sirma Karapeeva says since the CPTPP came in effect in December last year, overall beef exports to Japan have increased 22 percent by volume and 15 percent by value.
“So far, we have seen two rounds of tariff cuts on beef into Japan. Pre-CPTPP, our beef exports faced a 38.5 percent tariff that has now been reduced to 26.6 percent and will continue to decrease to nine percent over the next 15 years.
“Effectively, the CPTPP has already saved around $14 million in tariff costs on New Zealand beef exports into Japan.”
Prior to CPTPP, New Zealand’s beef market share had been dropping. Across the Tasman, Australia’s 2015 trade agreement with Japan saw its beef exports to Japan soar by $1 billion, while New Zealand’s fell by $25 million.
“Under the CPTPP we have now achieved parity with Australia in the market and we are already seeing a re-balance of market share as New Zealand beef has become more competitive.”
However, the announcement of a US-Japan trade deal is a cause for concern, says Karapeeva.
“Despite the US not being part of the CPTPP and their beef exports to Japan attracting a 38.5 percent tariff, US exports remain strong.
“We are keeping a close eye on the US-Japan deal. There are only scant details at this stage, but there are indications that the deal delivers a ‘CPTPP-style’ outcome.
“Depending on how and when this deal is implemented, it could potentially see the US gain tariff parity with New Zealand and other CPTPP countries and quickly erode our market share. We will know more about the potential impacts once the details are known.
“Meanwhile, the CPTPP has served to demonstrate, at a particularly difficult time for trade policy, that trade liberalisation and more effective trade rules are still possible and can deliver real benefits to businesses.”
The analysis also shows beef exports to China continue to grow, up in volume by 133 percent compared to August 2018, and 155 percent in value to $111.2 million.
“African Swine Fever and the resulting drop in pork production in China is driving demand for other forms of protein such as beef and lamb and we expect this to continue for the remainder of the year and well into 2020,” says Karapeeva.
Outside of China, Japan is the only major beef market where New Zealand exports have grown this year. Exports to the US, Canada, Korea and Taiwan have all declined compared to the same period last year.
Total exports of red meat and co-products to most other major markets were down during the month compared to August 2018.
However, sheepmeat exports to Japan increased 28 percent by volume and 24 percent by value compared to August 2018.